New Delhi, Dec. 14: With the Orissa government agreeing to the tax concessions for the Paradip refinery, Indian Oil Corporation (IOC) feels that the refinery would go on stream in 2009-10, while the Paradip-Haldia pipeline will be completed earlier in mid-2005.

IOC director (refineries) Jaspal Singh told The Telegraph, “We expect the environmental clearances for the pipeline to come through in the next two or three months and the design and engineering work will commence immediately for the Rs 600-crore project.”

IOC chairman M. S. Ramachandran had met the Bengal leadership recently to allay their fears over the pipeline hitting the revenue of the Haldia port.

The IOC argument is that it will be able to save Rs 400 crore a year on the transport of crude oil to the Haldia refinery and enable the expansion of its capacity from 4.6 million tonnes at present to 7.4 million tonnes.

The increased output of the refinery will generate higher revenue for the state and more traffic for the port as well. According to officials, this expansion cannot take place under the current high-cost transport system at the Haldia port which is too shallow for big ships.

Single very large crude carriers, which cost half as much as the smaller ships, will directly offload crude at the single-point-mooring at Paradip which will lead to saving of costs. Besides, IOC investment plans in the petrochemicals sector at Haldia will generate more port traffic.

The Paradip refinery has been hanging fire as the Orissa government had been dilly dallying over the tax concessions. These include waiving the entry tax on crude oil and sales tax on finished goods for 11 years.

The demand for petroleum products has been growing at a much slower rate than had been anticipated. For two of the past three years, the demand for petroleum products grew at 2.8 to 3 per cent, while in the third year it went up to 3.8 per cent. The expected rate of growth for these years had been 6 to 7 per cent.

The foundation stone for the 9-million tonne refinery project had been laid by Prime Minister Atal Bihari Vajpayee in May 2000 and it was scheduled for completion in 2004 so that the government could draw mileage in an election year.

The political question has assumed importance with the Lok Sabha elections around the corner as the east is lagging behind the west in industrial development. A new refinery for the eastern region has been on the cards for a long time but the extra capacity created in the west has created a glut of petro goods with oil companies having to export their output.